Dell Buyout: It’s Finally Here! Read the Details

More than three weeks after word first broke that Dell Inc. was in talks to go private, the deal is finally, really, actually here.

Here are the details that we haven’t all learned, or remained in unsettled, from weeks of stories about the biggest leveraged buyout since 2007.

Price – $13.65 a share for a deal value $24.4 billion. A 25% premium over where the shares traded the day before word first broke. Shares were halted at the opening bell after closing at $13.27 on Monday.

Go-shop period – The board, which formed a special committee and reviewed other strategic alternatives, will have a 45-day go-shop period where it can solicit and receive other bids.

Termination fees – The buyout group would get a termination fee of only $180 million if Dell strikes a deal with competing bidder during the go-shop period. That would be less than 1% of the deal’s value, a slim fee. For a bid outside of the go-shop fee, the buyout group would get a $450 million fee.

Dell board quote, from Alex Mandl, head of special committee –“The Special Committee and its advisers conducted a disciplined and independent process intended to ensure the best outcome for shareholders. Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”

Michael Dell’s quote – ”Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision. I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

Silver Lake quote: “Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” said Egon Durban, a Silver Lake Managing Partner. “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global IT solutions provider.”

Advisers:

Dell special committee: J.P. Morgan and Evercore Partners are acting as financial advisers and Debevoise & Plimpton LLP is acting as legal adviser to the special committee of Dell’s Board of Directors.

Dell: Goldman, Sachs & Co. is acting as financial adviser and Hogan Lovells US LLP is acting as legal adviser to Dell.

Comments (5 of 7)

The whole "the PC is dead" or it has morphed into the "tablet" is a fallacy. Compare the hardware specs for a tablet against even the most basic desktop or laptop and its apples and oranges. Often tech sector "analysts" forget that the vast majority of tablets purchased are IN ADDITION to users that already own a desktop or laptop. Anyone working that uses their computer for more than email or chitchat still needs a full powered PC (desktop or laptop). Tablets are an acessory, they have their place and use, but its limited.

11:27 am February 5, 2013

H. Craig Bradley wrote :

CLEAN SLATE

The old Dell Computer of the 1990's is forever gone. Remember, Michael Dell retired and turned his company over to the MBA's. You know what they do- nothing except "manage" existing organizational and product structures. MBA's, much like their Federal government counterparts do not innovate- the "kiss of death" in a technology company like Dell.

The tech. sector is simply much too dynamic and changes are fast and continual. Michael Dell left things on autopilot and then had to return as CEO a few years ago in an attempt to "turn the company around". He failed to adapt and the market quickly passed by the old Dell Computer in the process. Michael Dell lost touch at a critical time of change and did not pick up on the movement towards mobile computer devices such as Tablets. So, he is buying out the whole company at rock-bottom prices and can then restructure to fit the current market in a way he apparently could not accomplish as a public company.

10:40 am February 5, 2013

Klippenstein wrote :

Dell is trying to "steal" the company out from under shareholders during this time when the PC is viewed as Dead by media. We should know that the PC is not dead, it has just morphed into a Tablet PC with Windows 8 and, already this past quarter, Microsoft's windows sales were up 20%. We should expect more healthy growth over the years.

At $13.65, and subttracting the $5 net cash deall has, this deal is valuing Dell at $8.65 per share, a PE of 6.15. Bought at this price, Dell offers an earnings yield of some 16%. That means, with no growth Dell can buy itself back in less than 5 years! (some 16% annual return compounded). This that is rediculously cheap. Must acquistions are done at a PE of 15, giving Dell a value over $20 per share. Its highway robbery (especially if Windows sales rebound as we should expect -- and the buyers, no doubt do)

10:38 am February 5, 2013

Andy wrote :

I would foreseen Dell will be like HP where the internal structure will be total overhauling and 20%-25% employees worldwide will be lay off with the exit package given. The company is looking at 20,000 employees to be in the radar for that execution plan to become competitive and profitable company in the market

10:22 am February 5, 2013

Klippenstein wrote :

This deal is really highway robbery. At 13.65 - some $5.00 per share in net cash held within company, this deal is really for $8.65. Given even a low earnings of $1.30 per share that is a PE of 6.15 and an earnings yield ((per share if you prefer) of some 16%. That means the deal pays for itself in less than 5 years (assuming depressed earnings and NO growth). Dell earned some 1.80 last year. Deal wants this company private now when it is dirt cheap and he will float it back on the market in a few years for multiples of what he bought it for. Further, I think there are many reasons that Windows 8 Tablets and Tablet PCs will be a huge success over next 5 years and this will invigurate the whole PC market. I would like a higher price, I think it is worth at least $20.

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